Ukraine Simplifies Licensing Requirements For Foreign Construction Companies

New wartime industry regulations create opportunities to participate in Ukraine’s reconstruction.

Ukrainian legislation has always required construction companies to obtain licenses for construction and installation works of average consequence (СС2) and significant consequence (CC3) facilities. These construction categories include multi-apartment residential buildings over 100 meters high, large public buildings, industrial facilities, universities, colleges, schools, preschools, shopping malls, hospitals, and other major construction projects.

Whether a construction project requires a license depends on the building’s construction class and complexity. Groups CC2 and CC3 differ in their requirements as to materials, weld procedure, and a range of other factors. Accordingly, the licensing procedure and basic list of permit documents differ on a case-by-case basis. For example, objects in group CC3 undergo the most complex and lengthy procedure. Unfortunately, most foreign construction companies have traditionally been frozen out of this lucrative market.

This may now be changing. In August 2024, Ukraine’s Cabinet of Ministers has passed a resolution creating new opportunities in the construction industry. At long last, foreign construction companies now have the right to engage in construction activities in Ukraine during martial law under a simplified procedure, without the need to obtain a license to build large-scale structures and facilities.

Specifically, for the duration of martial law, foreign companies that conduct activities in Ukraine through permanent representative offices may carry out the construction of objects with average (CC2) and significant (CC3) consequences simply by submitting to the licensing authority a declaration containing all relevant information, full company description, and other details. The submission may take place in electronic form through Ukraine’s popular Diia Portal or via hard copy.

One of the documents that a foreign construction company must submit is an acknowledgment that the company is familiar with the requirements of the applicable Ukrainian legislation, which establishes an exhaustive list of requirements for conducting activities subject to licensing, and undertakes to comply with them. For example, in September 2022, revised building standards significantly changed safety regulations for buildings and structures, regulating mechanical resistance and stability, energy efficiency, barrier-free accessibility, environmental requirements, and fire safety issues. These standards also contain new requirements for the construction of such facilities as refrigerators, warehouses, and grain silos. Naturally, foreign construction companies are expected to fully comply with all these rules.

The new Cabinet of Ministers resolution opens unprecedented opportunities for foreign construction companies with Ukrainian representative offices, allowing them to start reconstructing Ukraine during wartime. When martial law status is eventually lifted, foreign construction companies will have up to three months to obtain the relevant permit documents according to the procedure, terms, and conditions set by applicable legislation at the time.

Given the scale of the wartime destruction in Ukraine and the estimated $750 billion necessary for post-war reconstruction, international donors, including the United States, the United Kingdom, Poland, Germany, and France, have all already promised to help finance the rebuilding of Ukraine’s infrastructure. Many others are expected to follow. Foreign construction companies that were active in Ukraine during the war will likely be the first to benefit from these reconstruction efforts, since they will already have their foot in the door, together with experience in Ukrainian market conditions and work culture, and lower start-up costs than any incoming competition.

Continued reform of construction control procedures will play a key role in attracting the foreign companies needed to reconstruct Ukraine following the end of hostilities. With this in mind, it is reasonable to expect that Ukraine will continue to implement transparency and simplify licensing procedures in the construction field as it seeks to set the stage for national recovery and pursues full membership of the European Union.

About the author: Alex Frishberg is a senior partner at the Kyiv offices of Frishberg & Partners (www.frishberg.com), specializing in Ukrainian real estate transactions.

By Frishberg & Partners, Ukraine, a Transatlantic Law International Affiliated Firm. 

For further information or for any assistance please contact ukraine@transatlanticlaw.com

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